Having fallen behind the curve on inflation and embarrassed itself by lecturing the market on the correct definition of transitory, the US Federal Reserve is now trying to sprint ahead again by signalling a faster and earlier reduction of its swollen balance sheet than bond-market participants had expected.
Released on Wednesday, the minutes of the December meeting of the Federal Open Market Committee (FOMC) show that almost all participants agreed it would be best to begin balance-sheet reduction soon after the first rise in interest rates – which some dealers expect as soon as March and that is fully priced in for May.
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